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The Chicago Teachers Union went on strike in September of 2012, protesting layoffs and cuts in funding. Yet a series of recent revelations show that Mayor Rahm Emanuel continues to place corporate interests above residents' basic needs. (Firedoglake / Flickr / Creative Commons)

Features » April 11, 2014

Corruption in the Windy City

In times of crisis, public employees often take the fall while the corporate class prospers.

We aren’t told that while states and cities pretend they have no money to deal with public sector pensions, many are paying giant taxpayer subsidies to corporations—subsidies that are often far larger than the pension shortfalls.

In America, there is regular ol' corruption, and then there is Chicago Corruption, with a capital “C.” America's third largest city is so notoriously corrupt, all you have to do is say “Chicago politics” and many people instantly start making jokes about payoffs and reciting lines from “The Untouchables.”

Yet, while the Windy City's brand of corruption is extreme, it is also emblematic, as a recent spate of revelations prove.

Chicago is facing a pension shortfall for its police officers, firefighters, teachers and other municipal workers. If you've followed this story, you've probably heard that the only way Mayor Rahm Emanuel can deal with the situation is to slash those workers' pensions and to jack up property taxes on those who aren’t politically connected enough to have secured themselves special exemptions.

This same fantastical story, portraying public employees as the primary cause of budget crises, is being told across the country. Yet, in many cases, we’re only being told half the tale. We aren’t told that the pension shortfalls in many locales were created because local governments did not make their required pension contributions over many years. And perhaps even more shocking, we aren’t told that while states and cities pretend they have no money to deal with public sector pensions, many are paying giant taxpayer subsidies to corporations—subsidies that are often far larger than the pension shortfalls.

Chicago exemplifies how corruption is often at the heart of this grand bait-and-switch.

According to a report by the taxpayer watchdog group Good Jobs First, the supposedly budget-strapped Windy City—which for years has not made its full pension payments—has mountains of cash sitting in a slush fund controlled by its poverty-pleading mayor. Indeed, as the report documents, the slush fund now receives more diverted property taxes each year than it would cost to adequately finance Chicago’s pension funds.

Yet, Emanuel is refusing to use the cash from that slush fund to shore up the pensions. Instead, his new pension “reform” proposal cuts pension benefits, requires higher contributions from public employees, raises property taxes—but also quietly increases his slush fund.

Why, you ask, would Emanuel refuse to relinquish some of the half billion dollars a year that is going into his slush fund? Perhaps because he has been using it to enrich Chicago's corporate class, including some of his biggest campaign donors.

For example, just after Emanuel took office, he used the slush fund to finance a $7 million subsidy that will benefit a grocery chain. The CEO of that chain’s parent company gave Emanuel’s campaign $25,000.

$29 million subsidy to support a new skyscraper development plan. Opponents of the subsidy told CBS that the money is simply financing “a very expensive corporate plaza” for the building. Now here’s the kicker: The building will house the new Chicago headquarters of a law firm whose employees have given Emanuel more than $125,000.

Then there is Emanuel’s $55 million subsidy for a new hotel near Chicago’s convention center. An investment company that owns a major stake in the construction firm gave Emanuel's campaign $31,500.

Not to sound like a broken record, but again: This same thing occurs in states and cities across the country. The wealthy corporate interests who bankroll politicians have for years convinced those politicians to not make required pension payments and to instead spend the cash on taxpayer subsidies - the kind that happen to go to those politicians' donors.

Now that the bill for such irresponsibility is coming due, those bankrolled politicians are trying to protect the subsidies their donors so cherish by trying to balance budgets primarily through punitive measures against taxpayers and public employees.

Unfortunately, in this massive wealth transfer, corrupt Chicago is not the anomaly. It is a microcosm.

David Sirota, an In These Times senior editor and syndicated columnist, is a staff writer at PandoDaily and a bestselling author whose book Back to Our Future: How the 1980s Explain the World We Live In Now—Our Culture, Our Politics, Our Everything was released in 2011. Sirota, whose previous books include The Uprising and Hostile Takeover, co-hosts "The Rundown" on AM630 KHOW in Colorado. E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

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Posted by crowsin on 2014-04-16 02:13:38

True. My suspicion is that if one were to lay out all the numbers, this article is alarmist claptrap that would be exposed as such. Which is why Sirota would rather pick selective anecdotal information and use it to weave a false overall story, as opposed to doing real journalism.

Posted by jimb82 on 2014-04-14 10:20:47

You're asking for too much from Unions lackeys. Illinois happens to have the largest pension deficit. I resent the fact that non-union members must pay for these cadillac pensions through higher taxes. Unions are greedy, and they rewards mediocrity and laziness. When there are layoff, it's is strictly by seniority. So old geezers who are lazy and can't hack it anymore keep their jobs while younger more energetic people are let go.

Posted by jesus666 on 2014-04-13 19:14:54

What a crock--that pension funding is below what it should be because cities didn't put in their part. Yes, they didn't because the couldn't afford it!!! Public pensions are nothing but extortion.

Posted by jesus666 on 2014-04-13 19:10:38

This article is a lot of stereotypes with very little substance. Many governments have these sorts of "slush funds", which are funds used to invest in start ups. Texas governor Rick Perry uses this approach in Texas and no one calls it corruption. If there is evidence that money in the fund is used illegally, then that would be a story. Otherwise, I think a more accurate title for this piece would be about "Government Boondoggles" than about corruption; of course, that wouldn't fit the conservative stereotype of Chicago as well.

Posted by Christopher Rojas on 2014-04-13 08:06:03

I hope you remembered your tin foil hat.

Posted by Christopher Rojas on 2014-04-13 08:03:12

It would be nice to see some actual numbers, rather than cherrypicking a few anecdotes. I have no idea from reading this article whether its thesis is true or not.

This article says nothing about the size of the pension shortfall, how underfunded it is and has been, how big the teachers' givebacks were, or how big the supposed mountain of cash controlled by Emanuel is. Those would be useful facts for the reader to know. After all, he does assert that "giant taxpayer subsidies" are larger than the pension shortfalls. A little proof of that point would be nice. You know, over how many years do the subsidies (generally tax abatements) run, how much economic activity and tax revenue do the employers create by moving to or staying in Chicago, that sort of thing.

But I know math is hard.

Posted by jimb82 on 2014-04-13 07:47:03

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Posted by glissando on 2014-04-13 07:20:21

And perhaps even more shocking, we aren’t told that while states and cities pretend they have no money to deal with public sector pensions, many are paying giant taxpayer subsidies to corporations—subsidies that are often far larger than the pension shortfalls.

That's because they're afraid that if they don't, people from other cities and states will show up and offer any business that can do business in another state that they should move there, and they'll sweeten the deal as well (AKA Texas). It seems unfair, but it's basic bargaining power - the companies have more exit power than the public sector employees, and they can and will walk if you're not careful. And since Chicago has even worse unemployment that Illinois's 8.7%, Rahm is understandably not eager to do anything that might increase that.

Granted, this is Chicago, so there's almost certainly some good old fashioned corruption going on. But it's not the main driver at work.